Why procurement should be in the driver’s seat (if not already)
In plain language, procurement is the “process of obtaining supplies of something, especially for a government or an organization” (Oxford Learner’s Dictionary). But there, we are talking primarily about transactional (tactical) procurement, which is now going out of favor largely because of its excessive focus on pricing and lead time. After all, these are functions that can be easily automated. The procurement business process has, by common consent, a higher purpose (“strategic”), and it’s crucial that organizations make all efforts to free up the bandwidth of their purchase professionals, so they can focus on such long-term goals that go beyond cost savings. The last mentioned is anyways a given in any procurement deal worth its name.
As organizations set to jump-start their big vision for procurement, which is expected to make an appreciable impact on productivity and supplier relationships, aspects like strategic sourcing, risk management, and process improvement take the front seat. By uniquely leveraging the organization’s procurement strengths, this forward-looking approach stretches the possibilities of the traditional purchasing function to comprehensively include all the sequence of steps in the procurement business process from one end to another!
This means every single step in the purchase sequence (need identification, purchase request, vendor evaluation and negotiation, contract finalization and implementation, as well as supplier management) enters the equation. Nothing is left out.
Challenges of the Service
Sourcing as strategy
Achieving the lowest possible costs in supply network management and getting the most optimal purchase prices from suppliers are some of the key aims of this procurement business process. To this end, multiple suppliers are very thoroughly evaluated on the basis of quality, price, as well as fulfilment time and terms before onboarding the most optimal providers. The cost components (e.g., material, labor, overheads) of a product or service are examined and analyzed in detail to ensure procurement deals offer great value for money. The price points at which a product or service is purchased doesn’t tell the whole story. Heedful of this, strategic sourcing considers all costs associated with a product from product design and development through maintenance to its disposal.
Prudent risk management
At bottom, risk management involves a series of actions directed toward recognizing, gauging, and moderating the impact of various uncertainties on the procurement business process. Broken vendor selection processes, supplier failures, compliance issues, poor e-procurement adoption, human errors, and suboptimal contract management are some of the commonest risks we come across in procurement. By reducing risks to the smallest possible degree or acceptable level or even sharing the risk with third parties (via insurance policies, outsourcing), effective risk management approaches will keep the business’s key financial metrics on track.
Continuous process improvement
As the term suggests, this is about finding ways to make the moving parts of the existing processes move faster, “straighten out” procedures, and do more with progressively less effort. Any activity that turns out to be a dud is culled without a second thought. What is the point of perpetuating an activity that is of no consequence to the customer? Automation reduces human intervention in jobs that are deemed repetitive, time-killing, and possibly soul-destroying! The thinking minds, thus liberated from brain-numbing tasks, can be redeployed in more critical revenue-grossing activities. Meanwhile, the templatization of routine pieces of work accelerates the procurement business process by reducing redundancies, human errors, variances, rework, and improving accuracy, most of all in compliance reporting.
How SpendEdge can help you?
At SpendEdge, our experts develop end-to-end risk mitigation strategies to help businesses deal with potential transportation challenges. Creating contingency plans to minimize the impact of delays or disruptions on the procurement business process is just one of them. For years, businesses across sectors have been working with us to build concise dashboard views of enterprise risks, based on which they initiate effective remediation measures. We also enable them to quantify the potential impact of critical vulnerabilities on business operations.
Our experts uncover ever newer possibilities to bolster clients’ supply chain resiliency while CPOs turn to us for assistance in framing compelling arguments to bump up their supply chain budgets. Enterprises of any size would most certainly need an effective backup strategy, and ideally, this should include a sufficient number of providers in various functional areas. Besides all this, our expertise is most sought after when it comes to gathering irrefutable metrics on supplier experience, and this comes in handy where businesses want to energize their supply networks. Timely and accurate market metrics on cost and pricing are also key to determining fair prices for various equipment.
An MNC transportation player cranks into gear, cashes in on process improvements
Global trade today exceeds US$25 trillion, and this buying and selling is a key driver of the world economic system. Choosing the most optimal means for conveying goods to consumers from their points of production is a key facet of international trade, and hence the primacy of transportation procurement. When it comes to the procurement business process, customers prioritize the safety of goods and personnel and are less tolerant of delays and disruptions unlike ever before. Customers seem serious about climate change as evident from a growing shift toward ecofriendly transport procurement solutions. Transportation vehicles are overly complicated machines and only detailed inspections can ascertain their safety and roadworthiness. Our client is a transnational logistics and transportation business headquartered in North America. Delivering products to end users with the minimum conceivable lag and the lowest possible cost is the business’s professed objective.
Rising operational cost was a key issue continuously troubling the client’s growing fleet of trucks, trailers, and specialty transport equipment. Equipment utilization was far from optimal, and apart from this, maintaining and renewing the fleet was proving to be another major headache for the procurement business process team. A tumultuous market and weak supply-side links were to blame for the most part. In mid-2023, the client decided to take advantage of our demonstrable expertise in transportation procurement.
Our experts identified potential supply-side participants, and this came at the end of a grueling and extensive market study. Our teams also shortlisted prospective transport equipment manufacturers and favorable transport leasing options. Among the parameters considered by the study were the brand reputation, dependability, and fiscal stability of the prospective suppliers. Our incisive research insights on the procurement business process, which the client promptly put into action, have translated into significant business results.
